Democrats Must See Whole Picture Before Taking Out Eraser

December 15, 1986|By Tom Peters, Tribune Media Services.

Pictures are not only worth a thousand words, they also make it easy to choose sides.

The kid on the cover of the Nov. 24 Fortune magazine is the sort of person you love to hate. The young investment banker exudes arrogance, topped off with a stogie tilted at a jaunty angle. The cover proclaims that he is paid $500,000 a year.

Pictures of arbitrager Ivan Boesky dripping with self-satisfaction don`t help him, either. And the photos of Prime Minister Yasuhiro Nakasone apologizing for a racial slur at Americans reinforces the public stereotype of Japanese cunning.

By contrast, have you noticed that all farm foreclosure stories feature a family snapshot, with two or three round-faced urchins and a wife who looks like the friendly kid with freckles who sat in front of you in the 3d grade?

Don`t underestimate the power of these images. They are about to profoundly affect American economic policy.

Incidentally, they may make the newly empowered Democrats the handmaidens of big business management in a way that Ronald Reagan would never have dared. Four policies the Democrats seem certain to pursue will negatively affect America`s competitiveness:

-- Clamp down on takeovers. Rep. John Seiberling asked Sir James Goldsmith, ``Who the hell are you?`` at a House subcommittee hearing called in response to Goldsmith`s hostile bid for Goodyear. The Ohio Democrat, a grandson of Goodyear`s founder, lashed out when Goldsmith had the audacity to tell him that Goodyear`s acquisition program was dumb.

I believe that Goldsmith is dead right. In fact, I cannot name one well-run firm ``victimized`` by a hostile takeover. Nonetheless, I acknowledge that hostile takeovers do cause pain.

However, they would be unnecessary if management had acted decisively 5 or 10 years ago, when the handwriting on the wall became clear. I am a reluctant but solid ally of the raiders or anyone who will scare the wits out of the still-asleep chieftans of most Fortune 500 companies. Who will benefit from bills to curb takeovers? Already unresponsive big business management.

-- Reverse financial institution deregulation. Financial institutions need more freedom, not less--to support industry`s massive restructuring and to compete themselves. London`s stock-market deregulation, called the Big Bang, is the latest and grandest movement toward a global financial network. We either go with the flow toward relatively unrestricted globalization or lose the competitive race. The only clear-cut winners from Democrat-inspired re-regulation: The Japanese and Germans.

-- Pass protectionist legislation. Voters gave Democrats control of the Senate so they would get tough with the Japanese. The only sure outcome of protectionism is that protected firms will be allowed to get more slovenly, and the consumer suffers. We have protected textiles, steel and autos, and managements have frittered away the so-called ``breathing space`` in each case.

The semiconductor industry is the most recent debacle. The Japanese are defending against what looks like permanent protection by buying American. That is, by buying a landmark U.S. company--Fairchild Semiconductor.

The latest harebrained response from Silicon Valley is to propose pooling their manufacturing ineptitude by jointly building a mega-plant funded and overseen by the Department of Defense, an agency not noted for inducing cost- competitive, defect-free manufacturing operations. Winners from protectionism: The most negligent big business executives.

-- More aid to farmers. Thanks to accounting shenanigans, several big farm owners in California reportedly will pocket $1 million or so each this year from the last ill-written farm bill. But the new Democratic majority portends giving the farmers more money. That won`t solve the problem--too many farmers. Inevitable beneficiaries of more farm aid: A few agribusiness executives, not those forlorn souls whose foreclosure you see on the evening news or the consumer.

Despite the unintended beneficiaries, to beg the Democrats not to do things is futile. Fame and fortune do not accrue to politicians who turn their backs on popular actions.

So what are proactive, less destructive, Democratic options? First, skin the Wall Street gang alive, in broad daylight, for insider trading. But don`t bring the market to an abrupt halt with antimerger or re-regulation bills.

Second, enforce trade legislation to the hilt and publicly flay a Japanese company or two for dumping. But more significantly, Democrats should champion the cause of those millions of workers displaced by our managements` lethargic response to foreign competition. A major extension and increase of Trade Adjustment Assistance and no less than a GI bill for training and retraining should be aimed at the rank and file.

As for the farmers, we also should do everything we can to help them readjust, not simply put off once more their day of reckoning.

Traditional Republican business incentives focus on hardware. Democrats have a chance to become the proponents of ``human capital,`` not via anticompetitive protectionism, slowing financial markets down and propping up unneeded farmers, but with massive incentives and tax benefits to help workers and farmers aggressively seek new opportunities in a permanently transformed economy.